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Chairman Broun Highlights Possibility of A123 Going to China, After the Company Received $124 Million from Taxpayers

Dec 5, 2012

Washington, D.C. – The Subcommittee on Investigations and Oversight today held a hearing to examine issues related to international technology transfers, particularly as it pertains to how and where the benefits of American research, development, and innovation are realized. U.S. taxpayers provide both direct and indirect support for private sector research and development (R&D). Recipients of this federal support are often required by foreign nations to transfer that technology overseas in order to gain access to foreign markets.

“While the U.S. invests significant taxpayer resources in public and private sector research and development, other nations remain dedicated to acquiring the fruits of our labor,” said Subcommittee Chairman Paul Broun (R-GA). “These efforts to acquire U.S. technology have clearly had a significant impact on U.S. trade, GDP, and our standing as a world leader in research, development, and innovation.”

Chairman Broun continued, “Sometimes, companies are faced with the difficult decision to either file for bankruptcy, or agree to detrimental financing terms, such as transferring intellectual property, in order to receive additional investment. It was recently reported that A123, a U.S. company that has received $124 million of its $249 million grant from the Obama Administration to develop battery technology for electric cars, would file for bankruptcy.” Chairman Broun added that a Chinese corporation has expressed interest in bidding on the company, “making it entirely possible that the U.S. taxpayer’s investment in A123 will simply go to China.”

“Time-and-time-again, we have seen U.S. R&D investments, particularly in sectors that received favorable treatment from the current Administration like wind, solar, and batteries, simply be sent overseas,” Broun said. “It’s a dirty secret that nobody wants to talk about - not the government agencies that fund the R&D, not the companies that receive the R&D, not the associations that represent the companies, and certainly not the foreign countries that benefit from our R&D investments. Investments, I should add, that ultimately came from money we borrowed from China in the first place.”

Witnesses today discussed varying methods by which domestic technology and intellectual property are transferred to foreign countries, as well as the overall scope of such efforts and potential ways to limit such activity. Witnesses acknowledged that no federal agency is currently in charge of reviewing such activities, making it difficult to determine who ultimately benefits from taxpayer funded R&D investments. With over $400 billion in combined annual public and private sector R&D, significant amounts of R&D funding may be transferred without any way to identify it.

Dr. Robert D. Atkinson, President of the Information Technology & Innovation Foundation, testified that “In China, it is commonplace to require that firms transfer technology in exchange for being granted the ability to invest in China.” Dr. Atkinson said “Sometimes this process takes the form of mandatory licensing of technology… Sometimes this is in the form of requirements to open up R&D facilities where the technology often ‘goes out the back door’ in the form of Chinese researchers who leave to take the technology to Chinese firms.”

Chairman of the U.S. China Economic and Security Review Commission, Mr.Dennis Shea, summarized the issue, saying, “While there has been some market reform in China, the government still engages in centralized planning in an attempt to control the economy and guide growth.” Shea said that the Chinese government uses “a multi-faceted strategy…to develop a culture of innovation.”

At the outset of the hearing, Chairman Broun noted that several potential witnesses expressed apprehension with appearing before the Committee to testify on this topic out of fear of retribution against their business interests by foreign countries. “While they expressed serious concerns to us in private about the tactics of many foreign countries when it comes to technology transfer, they worried that speaking out publically about those tactics would adversely affect them in foreign markets,” Broun said.